Overview
Title
To amend the Internal Revenue Code of 1986 to permit kindergarten through grade 12 educational expenses to be paid from a 529 account.
ELI5 AI
H. R. 939 lets people use a special kind of savings account, called a 529 plan, to pay for school things like books and classes from kindergarten all the way to 12th grade, not just for college. This means families can use it for regular schools, homeschool, or even if they need extra help like tutoring.
Summary AI
H. R. 939 proposes changes to the Internal Revenue Code of 1986 to allow expenses for kindergarten through grade 12 to be paid from a 529 account, which traditionally supports higher education costs. The bill expands the definition of "qualified higher education expense" to include tuition and other costs associated with K-12 education, such as books, online materials, tutoring, and educational therapies. This includes funding for these expenses at public, private, religious, and homeschool settings. The changes would apply to distributions made after the bill becomes law.
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AnalysisAI
Overview of the Bill
The proposed legislation, titled the "Student Empowerment Act," seeks to amend the Internal Revenue Code of 1986. Its primary aim is to expand the use of 529 savings accounts, which were originally designed to help families save for college, allowing them to also cover kindergarten through 12th-grade educational expenses. These expenses encompass a wide array of costs, including tuition, curriculum materials, books, online educational resources, tutoring, standardized test fees, dual enrollment fees, and educational therapies for students with disabilities. This legislative change would be applicable to both public, private, and religious schools as well as homeschooling.
Significant Issues
Expansion of 529 Account Use:
A key issue is the broadening of what constitutes "qualified higher education expenses" to include K-12 education-related costs. This shift from higher education to elementary and secondary expenses could potentially lead to increased withdrawals from 529 accounts, diminishing the resources available for college tuition and related expenses.
Potential Misuse and Monitoring Challenges:
There is concern over the potential for misuse or abuse of funds, particularly with homeschooling-related expenses such as curriculum and instructional materials. The bill's provisions make it difficult to ensure that funds are being used correctly due to the challenges in monitoring and verifying what constitutes significant educational resources.
Qualification Criteria Ambiguities:
The bill sets vague criteria for tutors and instructors who provide educational support, which might lead to varied interpretations. It mentions allowances for educational services outside the home, yet lacks specific credentialing standards for these services, leading to potential inconsistencies.
Educational Therapies and Tax-Advantaged Funds:
The inclusion of educational therapies for students with disabilities raises concerns about the suitability of using tax-advantaged educational savings for such medical-related expenses. This inclusion questions whether these costs align with educational purposes or if they overlap with healthcare support.
Dual Enrollment Costs:
The provisions concerning dual enrollment fees lack specificity, raising concerns over the potential for overlap with existing benefits for higher education, which could lead to an unintended increase in overall education costs.
Impact on the Public and Stakeholders
Broad Public Impact:
The broadening of 529 account permissible uses may provide immediate financial relief to families facing high K-12 educational expenses, making private education more accessible. However, this could counteract long-term savings intended for college, potentially necessitating new strategies or sources of funding for higher education.
Impact on Families and Students:
For families, especially those with students with disabilities, having access to 529 funds for educational therapies can offer critical financial assistance. However, there is a potential risk that these changes dilute the effectiveness of these accounts for their original purpose—funding college education.
Impact on Educational Institutions:
Public and private K-12 educational institutions may see increased enrollments as the financial burden of tuition and related expenses is eased. However, this might lead to increased scrutiny over private and homeschooling practices to ensure proper use of funds, creating administrative or compliance challenges.
Policy and Economic Considerations:
From a policy perspective, the bill raises debates over whether educational savings should encompass a much wider range of expenses and how this broadened usage aligns with educational investment priorities. Economically, if implemented without strong oversight, there could be a shift in the dynamics of educational funding and a change in how families might prioritize savings for education at different levels.
In conclusion, while the "Student Empowerment Act" aims to enhance educational flexibility for families, it introduces complexities that necessitate careful consideration of its broader implications on the educational landscape and financial planning for education.
Issues
The broad definition of 'qualified higher education expenses' in Section 2(a) to include various costs associated with kindergarten through grade 12 education could alter the original intent of 529 plans as primarily for higher education. This could lead to a significant increase in withdrawals for lower education expenses, potentially reducing funds available for college purposes.
The inclusion of educational materials for homeschooling in Section 2(a) raises concerns about potential misuse or abuse due to the difficulty in monitoring and verifying the nature and educational relevance of materials purchased, especially under subparagraphs (B), (C), and (D).
The provision in Section 2(a) for tuition fees for tutors and educational classes outside the home may result in varying interpretations due to the vague criteria for tutors or instructors, which could lead to inconsistency and potential exploitation due to the absence of specific credentialing standards.
Allowing educational therapies for students with disabilities to be funded from 529 plans as mentioned in Section 2(a) prompts questions about the appropriateness of using tax-advantaged educational savings for what could be considered medical-related expenses.
Section 2(a) lacks specificity regarding justification and eligibility for dual enrollment fees, which could result in overlap or double benefits given the existing provisions for higher education, possibly increasing costs.
The complex and potentially ambiguous language in Section 2(a) could lead to differing interpretations across states, particularly concerning the qualifications for tutors and providers of educational therapies, necessitating clarity to avoid legal and financial disputes.
Sections
Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.
1. Short title Read Opens in new tab
Summary AI
The first section of the act states that the official name of this legislation is the “Student Empowerment Act.”
2. 529 account funding for homeschool and additional elementary and secondary expenses Read Opens in new tab
Summary AI
The amendment to Section 529 of the Internal Revenue Code allows funds to be used for various educational expenses related to elementary and secondary school. These expenses include tuition, curriculum materials, books, online materials, tutoring, standardized test fees, dual enrollment fees, and educational therapies, and it also applies to homeschooling expenses.